Welspun selling entire 40% stake in construction JV to Leighton for $99M

Welspun Infra Projects Pvt Ltd (WIPPL), a subsidiary of Apollo Global-backed Welspun Corp Ltd, has signed a share sale pact with Australian Securities Exchange-listed Leighton Group to sell off its entire 39.88 per cent stake in Leighton Welspun Contractors India Pvt Ltd (LWIN) for a net cash consideration of $99 million or about Rs 614 crore, the firm said on Monday.

Shares of the company rose 10 per cent on the Bombay Stock Exchange to hit the upper circuit for the day at Rs 64.40 per share, following the stake sale announcement.

Welspun will use the proceeds to deleverage its balance-sheet. The transaction is expected to be completed in the first quarter of 2014, subject to procedural conditions, the statement said.

“Welspun Corp has decided to exit LWIN to enable Welspun to redirect its efforts and reposition itself in the infrastructure space which has synergies with its other businesses,” Welspun said in the statement.

Welspun had picked 35 per cent stake in LWIN in 2011 for a cash consideration of Rs 470 crore and subsequently an additional cash-less transaction worth Rs 115 crore.

The Welspun group has diversified businesses and it has multiple firms under the flagship company Welspun Corp, which is involved in four businesses—line pipes, energy, infrastructure and steel. Private equity firm Apollo Global holds 13.3 per cent stake in Welspun Corp.

Some of these firms are listed including a part of the infrastructure business housed under Welspun Infratech (it owns majority stake in the public-listed Welspun Projects Ltd).

The group has a separate listed textile firm called Welspun India, a filament yarn producer Welspun Syntex and Welspun Investments & Commercials, which is into a combination of trading activities and investment holding business.

Currently, it is splitting its steel, oil & gas exploration, energy and infrastructure businesses into a separate listed firm christened Welspun Infra Enterprises Ltd.

To streamline the structure, Welspun Infratech has also entered into an agreement with Welspun Infra Developers Pvt Ltd to acquire its 40 per cent stake in WIPPL, the company added.

The firm had disclosed early this year that it is acquiring 12.5 per cent stake of Welspun Maxsteel Ltd, held by Insight Solutions Ltd. Welspun Maxsteel houses sponge iron (steel) business.

This also marked a part exit of Apollo Global from the investment in BK Goenka-promoted Welspun Group.

The private equity giant had invested $350 million in two group companies – picking minority stake in the group’s flagship Welspun Corp Ltd (for $290 million) and Welspun Maxsteel Ltd (for $60 million). It had also proposed to invest separately in the group’s infrastructure business, but that did not happen.

Apollo Global initially picked up 12.5 per cent stake in Welspun Maxsteel from Welspun Steel for $31 million and was to invest another $29 million in the company but sold the stake to the parent firm.

The group also had its share of restructuring over the years. In 2008, it demerged the operations of Welspun India into three companies (other two being Welspun Global Brands and Welspun Investments, which is now Welspun Investments & Commercials), only to merge back one of these last year.

(Edited by Joby Puthuparampil Johnson)

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